All Forum Posts by: Doug Pretorius

Quote from @Jacob Cunningham:

let’s say I want to begin wholesaling, maybe even wholesaling lease options. Can I work with a real estate agent? How would they be compensated for their time and effort? Could I have them handle a portion of the deal with the seller and end buyer for me? Would this be a JV between me and the agent? I would like an agents representation to avoid any legal grey areas and to network as well. 

Yes and no.

Yes you can contract property that's listed on the MLS to wholesale. It will be exceptionally difficult because you will need to convince not only the seller but also their agent. But it is technically and legally possible.

No most states prohibit you from listing a contract on the MLS and when you're wholesaling you only have a contract to sell you don't have property to sell.

Both of these apply whether you're wholesaling for cash or lease options. Wholesale lease options have the added problem that in most cases you won't get enough money from the tenant/buyer to pay one let alone two commissions.

If you still want to go ahead you don't need a JV agreement. Just hire the agents and pay commission like normal.

@Ryan Taylor Sub2 really shouldn't be used for long-term holds. Your aim should always be for you or your occupant to refi within a few years. If the timeframe is say 5 years or less the odds of the bank calling the loan are pretty low historically. I've been at this for 22 years and I've never had a loan called.

That said as @Bill B. alluded to a rising rates + declining values scenario is exactly the reason banks started including that clause in their loans to begin with. So we can expect the risk to be higher for the next few years.

Quote from @Jason V.:

I can guarantee their agent has told them that they're working for them for "free" because you are paying the commission for both sides. It's one of the major benefits buyer's agents use to attract clients. Although it's not impossible, there's maybe about a 0.01% chance the buyer thinks they have to pay half the commission on top of the price they've offered.

@Jason V. Changing the fee after the job is complete is called negotiating in bad faith. If you wanted a lower commission you should have negotiated that upfront not after they spent their time and money marketing your house.

You have zero right to ask the buyer's agent (who isn't representing you) to lower their part of the commission either. Also keep in mind that if it wasn't for this buyer's agent you wouldn't have this offer at all.

Sorry bro. If you look through my post history you'll find I have no love lost for agents. I also 100% agree they aren't needed and there should be a single centralized database where all buyers and sellers can do business directly with each other. BUT I absolutely can't support you trying to change the fee you agreed to after they've successfully done the job you hired them to do.

Quote from @Jay Hinrichs:

Hey Jay! I opted out of the craziness the last few years. My local market saw a 62% run up from January 2020 to February 2022 and now it's down nearly 30%. Interest rates went from 1.6% in November 2021 to over 5% today and are expected to rise another 75 to 100 basis points next month. Wild times!

What have you been up to?

It's going to be very interesting to see how this all plays out. Both of our governments have been doing unprecedented things with money supply, interest rates, and cooking the inflation books. Things were bad before the pandemic but during and since has been almost beyond belief.

It seems to be all coming home to roost for the Canadian real estate market. It may not be quite as bad for the US because your appreciation hasn't been quite as out of hand as ours. Also we had a very mild correction from the 2008 crisis compared to you so we have further to fall to get to affordable housing prices again.

@Account Closed Yeah things aren't looking good for people who bought in the last 3 years. The national average price has already fallen 22% between the peak in February to August. The Bank of Canada's bank rate rose from 0.25% last November to 4% on Sep 6th with another 75 basis point increase all but guaranteed at their Oct 25th meeting.

Despite this sharp rise in rates inflation is still running hot at 7.7%. Correct me if I'm wrong but I heard the US CPI numbers came in higher than expected which means higher rates for the US which in turn means Canada has to raise rates more as well.

The fallout is going to be unbelievable in parts of Canada where the local job market is weak. Places like the Maritime Provinces saw 3x price increases as people left downtown Toronto and Vancouver during the pandemic thinking remote work was going to be permanent. Now they're being recalled to their downtown offices and they're panic selling and no locals can afford the prices they paid especially with interest rate going up the way they are.

Sorry for the info dump :)

@Account Closed Yeah that's pretty much accurate. We can get mortgages with a fixed interest rate for the entire amortization period, but no one does it because the interest rate is crazy. So most people do one of two things:

1. They get a variable rate mortgage which floats with the prime rate.
2. Or they get a fixed rate mortgage which has to be renewed (not exactly the same as a refi) every 5 years.

There are lots of variations on this theme. For example you can choose to "lock in" a rate for 1 year, 2, 3, 4, 5 etc. You can switch between any of these and a variable rate at any time if you have an open mortgage, otherwise you can switch when the renewal date comes up if you have a closed mortgage or you can pay a penalty and switch any time.

And to make things more complicated and silly. With the recent huge appreciation we've seen across the country there are now closed variable mortgages. Where your payment stays the same but your amortization floats with the interest rate. Some people have reported that their amortization on these has shot up from 25 years to 60 years.

All of this effects sub2 deals in 2 ways. 1) If you're offering the T/B a fixed payment you have to do them for shorter terms or have their payment float with the underlying payment. 2) The seller can't renew the mortgage once they move out of the property unless they switch to a commercial loan which they would never agree to in a sub2 deal. So that also means these deals are fairly short-lived before someone (you or the T/B) has to refi it out of the seller's name.

As for downturns in the economy. There's no fallback plan. People have to find a way to pay the new higher payment, or they have to sell, probably at a loss.

@Account Closed You just described my favorite way to do deals. Here in Canada we've got the perfect market conditions for these types of deals going on right now. Many secondary markets saw well over 60% appreciation in the last 2 years as people fled the big cities for more space while under lockdown. Now those markets are tanking and those same people need to move back to Toronto, Vancouver etc. because their remote work is coming to an end. Some of them have no equity or are underwater but have interest rates that put their payments below the currently exploding rent rates.

At the same time rapidly rising interest rates on new mortgages along with tightening lending policies is making it nearly impossible for many buyers to qualify.

The federal government has also announced a rent to own program which isn't large enough to make much of a dent in demand for alternative financing. But does lend a ton of credibility to the concept in the minds of prospective tenant-buyers.

You can probably guess why I'm more excited about investing than I have been the last few years :)

@Kuron McGraw He's not motivated. Motivated sellers have no problem answering simple questions like how much they need. Does he have a mortgage on the place? If not I'd offer 50% of its current value. If he does and it's worth taking over I'd tell him: "Good news! I can take over your payments and you won't have to pay me a cent!"